MRP vs ERP: overview, similarities and distinctions

By Indeed Editorial Team

Published 11 April 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

The elements that ensure a production business runs successfully include managing the shop floor, inventory, operations and scheduling. Real-time data and software technologies enable firms to automate processes and make intelligent data-driven choices as production and supply chains increase to meet more extensive global requirements. In the corporate world, enterprise resource planning (ERP) and material requirements planning (MRP) are two popular software solutions that help businesses save time and money through better data management.

In this article, we explore the distinctions and similarities between these two systems, what benefits they provide, when you may require an ERP or MRP system and which is most suitable.

MRP vs ERP

People often use the terms MRP and ERP interchangeably when, in fact, they have distinct meanings. Below are descriptions of MRP and ERP software:

MRP systems

MRP are systems you may use to identify and measure the production materials a company requires to help with production planning. Market and consumer dynamics have shaped the growth of MRP. Manufacturers may produce increasingly customised products rather than depend on price wars to gain clients as worldwide rivalry between enterprises grows.

These new goods have more features, necessitating a new approach to production management to keep up with rising product complexity and the desire for a faster time to market. As a result, the industry adopted MRP II and equipped it with functionality that MRP I lacked, such as general accounting and labour capacity planning. This method enables you to better manage goods over their whole lifespan rather than from month to month, allowing firms to fulfil production objectives and remain competitive.

Related: A complete guide to understanding production factors

Key features of an MRP system

An MRP system's basic features usually include the following:

  • You may use it to manage production operations, such as planning, scheduling and material control.

  • It's primarily designed for the manufacturing industry.

  • In general, it's a more straightforward software with a smaller scope.

  • Customer-facing functionalities may not fit.

Related: What is a Production Schedule? (With Stages)

Benefits of an MRP system

Some advantages of this system include:

  • Production control: Manufacturers may use it to handle all aspects of their production planning successfully.

  • Inventory control: In the manufacturing, warehouse management and supply chain management (SCM) industries, inventory control may be vital. If the manufacturer knows what's available and what he may replenish, the company may produce and deliver these products quickly.

  • Improved purchase planning: Essentially, purchase planning establishes parameters and tactics for obtaining the best value for a specific purchase.

  • Better data documentation and management: Real-time data may appear futuristic, but modern institutions and businesses use it daily. It gives more data on shop floor activity, task costing and improved visibility.

  • Better insights: OEE technology gathers data on machine downtime, which you may combine with information on wasteful work to produce a more refined picture.

Other benefits include accurate performance measures, reduced costs, the ability to accommodate short-term fluctuations in demand, the ability to plan, reduced overall inventory levels and better responsiveness to customers' needs.

Related: Project management system: definition and advantages

ERP systems

An ERP system covers all aspects of a business. ERP allows for better data management with financial and operational data integration. Hence, it helps in streamlining all relevant activities.

The ERP system and its functions

The functions of an ERP may include the following:

  • Companies use ERP systems to help plan, organise and automate activities such as supply chain management, finances, project management, personnel and manufacturing to serve an entire business better.

  • Businesses may enlist individual ERP software as a service (SaaS) to analyse specific procedures.

  • Companies may also choose between big-business ERP and small-business ERP, both geared to meet the demands of businesses of various sizes. An example of ERP software is the system applications product (SAP).

Related: What is SAP? (Including related skills and uses in the workplace)

Features of the ERP system

ERP systems typically possess the following features:

  • Instead of a distinct, independent system, the program employs a centralised database to bring order to various workflow areas, allowing all users, from clerks to CEOs, to produce, save and utilise the same data derived through standard processes.

  • You may use it to integrate and manage core business practices to streamline information and processes across the entire enterprise.

  • Any department, such as HR, sales or logistics, may use it.

  • It is capable of managing a vast number of projects at once.

  • It may include services like marketing automation, email marketing or customer help desks.

Related: What is enterprise resource planning? (With FAQ)

Benefits of ERP systems

ERP systems offer several benefits. Some of these are:

  • Reduced operational costs: In the present business scenario, organisations are increasingly competitive; hence, cutting costs has become extremely important for their growth and stability. With an ERP, a business may save money on operational and administrative costs since it may operate from a single centralised system, eliminating the obligation to pay for various systems and the accompanying maintenance costs.

  • Forecasts are more accurate: Accurate forecasting is critical for manufacturers since it allows them to better plan and manage their businesses. An organisation may be more informed and able to make better decisions and projections if it accesses the data that an ERP delivers through its reporting functions.

  • Businesses may benefit from cross-application connectivity with a SaaS ERP solution: You may transfer data to provide organisations with a complete picture of operating operations since apps may link and interact via common on-premise databases or the cloud. The ERP software then generates detailed performance data on how resource spending, enabling better decision-making.

ERP systems also provide the following business benefits:

  • Automation and integration reduce costs, resulting in enhanced efficiency and production.

  • A decrease in human mistakes results in less squandered time and resources.

  • Cooperation and communication between roles and departments may improve.

  • Management of partners and suppliers may improve.

The relationship between MRP and ERP systems

Both systems work towards improving an organisation's management by streamlining processes to ensure they run smoothly. A company may utilise both ERP and MRP. Both systems are stalwart in their respective areas of operation but complement each other's processes with their unique strengths. An ERP system best manages inventory and supply chain management, whereas an MRP system controls production mechanisms.

Related: Productivity vs efficiency: The guide

Distinctions between MRP and ERP systems

Below are some differences between MRP and ERP:

  • The main distinction between ERP and MRP is that ERP systems assist in planning and automating a wide range of back-office business tasks, whereas MRP systems focus on materials management.

  • Accounting, manufacturing, supply chain, customer management, quality, operations and planning are all impacted by ERP. MRP has a limited ordering and planning scope for manufacturing supplies; as a result, each system's users may be distinct.

  • People from several departments may use ERP software, whereas only those who work in manufacturing use MRP tools effectively.

  • Another distinction between ERP and MRP is that MRP is more self-contained. Though you can mix and match some systems, it may be challenging. In contrast, ERP systems are reasonably simple to connect with other systems.

Frequently asked questions about MRP and ERP

Here are a few common questions about MRP and ERP:

Which system is ideal for you?

When deciding on an ERP or MRP system, there are some important factors to consider.

If an organisation requires a solution to help manage its production operations, an MRP may likely be the ideal choice. Inventory, production and scheduling are examples of these processes. This system includes the added advantage of being less expensive than an ERP. If a firm wants a system that can provide an overall picture of all procedures and processes within the corporation, an ERP may be suitable.

What business software is currently utilised?

MRP may be a good option for companies that already have software for customer-facing activities like estimating, sales order processing and debtor management but require supplier and stock management and production control. It may also be the ideal answer for companies that don't have the funds for a full (or partial) ERP system, yet production control is crucial.

Which business operations require improvement?

An MRP system is specifically developed for improving manufacturing operations. A company may require ERP software to optimise, automate and integrate activities beyond manufacturing, including accounting, human resources and other areas.

What is the current software budget?

MRP systems are less expensive since they provide a more straightforward solution. To justify committing a budget to an ERP system, a company may analyse what such a system may achieve and how it may affect its bottom line and growth. Many businesses that invest in an ERP system discover that the system's optimisation of company processes leads to enhanced efficiency and productivity that eventually pays for itself.

Is the business expanding quickly?

To be successful, a firm expanding more rapidly may require a high level of dependency on automation and standardised, simplified operations. This process necessitates the use of an ERP system. If a business expects its growth to remain steady, it may require an MRP system.

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